Week 4
discussion
A firm’s capital structure is determined by more than just a
component cost for each source of capital and is not fixed over time. Rather,
the capital structure of a firm is determined by conditions in the domestic and
international economies and it should also reflect changing conditions in the
economy. In other words, the relationship between risk and return should be the
major consideration in establishing the capital structure of the firm and the
value of the firm.
Address all of the following questions in a brief but
thorough manner.
What is the basic relationship between risk and return and
how is this reflected in the value of the firm’s stock? The cost of debt?
What are the primary factors that should be considered when
establishing a firm’s capital structure?
What are the primary differences and/or similarities between
financial risk and business risk?
The final paragraph (three or four sentences) of your
initial post should summarize the one or two key points that you are making in
your initial response.
Your posting should be the equivalent of 1 to 2
single-spaced pages (500–1000 words) in length.
